By Ajita Tynan, Manager, Listed Company Services, ASX
Heartland Group is just one of a range of listed businesses investors will get to know at this virtual event.
Small and mid-cap companies are a vital part of Australia’s capital markets and an important opportunity for investors. But often they don’t receive the same exposure as our big-name listed companies.
The ASX’s Small and Mid-Cap Conference, which is being held as a hybrid event for the first time this year on 20 September 2023, is a fantastic opportunity to find out more about these emerging companies. Attend in person or watch online and get to know a host of smaller companies and hear from their CEOs about their future plans and investment proposition.
Heartland Group is one of the companies presenting on the day. Although the bulk of Heartland’s business is in New Zealand, it operates a reverse mortgage company in Melbourne called Heartland Finance and a livestock finance business in Brisbane, StockCo.
Its acquisition of Challenger Bank is currently going through regulatory approvals and the intention is for Heartland to become Australia’s newest bank. CEO Jeff Greenslade says the business also plans to move into the Aussie auto finance market. “It’s a continuation of what we’ve been doing in New Zealand and what we have already established in Australia.”
A viable alternative
One of Heartland’s major points of difference is its ‘best or only’ strategy. Under this approach, it focuses on providing products that are the best or only one of their kind in the market. It means the business operates in markets in which the big banks don’t have significant market share, or in areas where customers are underserviced for banking and finance needs. It’s what sets Heartland apart from other financial services companies.
“We also have a different distribution strategy because our products are predominantly offered online. For instance, in New Zealand, we only offer residential mortgages online; there’s no person-to-person contact, and we don’t have branches. Because we’re disciplined in this area, we are able to offer prices that are the same or better than the major banks,” says Greenslade.
This is also something Heartland may pursue in the Australian market once it acquires Challenger Bank. “Challenger is advanced in its approach to digitisation so we have the opportunity to come in and establish a pure digital platform. The advantage of this approach is it gives us a lower cost of onboarding and servicing customers. If we can bring this to Australia, we’re confident we’ll be able to provide competitive pricing across a number of products,” he adds.
Piquing investor interest
Aside from offering an alternative to major banks, Heartland also provides a novel way for investors to gain exposure to the financial services sector.
Greenslade explains Heartland’s success is not highly correlated to the ups and downs of the residential property market. This is in contrast to the major banks, whose performance is in large part driven by their home loan books.
“We offer a differentiated financial sector investment. Our major exposure is to reverse mortgages, demand for which is propelled by changing demographics as the population ages and seeks to access some of the equity in their homes to live a more comfortable retirement. This dynamic is expected to continue to grow, unimpeded by economic conditions.”
It’s the same reason why Heartland is pursuing a strategy to grow its share of the auto finance market, which is also not highly correlated to the economic cycle, given people still need a car.
“Our livestock lending business is a different play again, based on ongoing demand for Australian beef. Overall, what we offer is a form of financial sector exposure that is less driven by the crowd,” he adds.
Another differentiation point is that Heartland’s success is based on efficiencies to achieve scale. “We have technology that enables us to replicate the scale of the big banks and we can compete based on our cost-to-income ratio,” Greenslade says.
Presently, Heartland’s shareholder base comprises 70 per cent retail investors and 30 per cent institutions, with the bulk of the register based in New Zealand. Greenslade wants to change that so the register includes more Australian investors. The business maintains listings on ASX and NZX.
“We do have a very strong New Zealand business, but its mature and we see our Australian business as having considerable upside,” he adds.
Australia’s equity markets will also potentially offer the business the opportunity to access capital down the track to help fund its growth, given ASX’s relatively larger size and depth versus NZX.
As for the future, Greenslade says Heartland will continue to roll out its ‘one product, one person’ strategy. This means it’s not continually trying to cross sell its products to its existing customer base, which supports retention and satisfaction.
All the companies that are presenting at the next ASX’s Small and Mid-Cap conference have an equally compelling story to tell. Registrations open Thursday 24 August. View presentations from previous conferences here.